It’s been a rollercoaster ride for crypto investment funds as the latest data from CoinShares shows heavy outflows for the second consecutive week.
Digital asset investment products saw net outflows of $584 million last week, bringing the two-week total to a staggering $1.2 billion. This sharp reversal comes after a record $2 billion in inflows in May, highlighting the volatile and emotional nature of the cryptocurrency fund industry.
So what’s behind this sudden change in investor sentiment? According to CoinShares, it’s all down to interest rates. The recent outflows are “a reaction to investor pessimism about the prospects of interest rate cuts by the Federal Reserve this year,” the report noted.
Fading hopes of a Fed policy shift have dampened Bitcoin’s momentum, with the largest cryptocurrency bearing the brunt of the outflows. Bitcoin funds recorded net outflows of $630 million last week, accounting for the majority of overall redemptions.
Interestingly, investors are not rushing to bet against Bitcoin despite the worsening sentiment: Bitcoin short funds, which profit if the price of BTC falls, have actually recorded modest outflows of $1.2 million, suggesting that bearish speculators are holding back for now.
The second-largest cryptocurrency, Ethereum, was also hit hard by the risk aversion, with ETH funds recording outflows of $58 million, but some altcoins bucked the trend, with Solana, Litecoin and Polygon funds attracting smaller but notable inflows.
Multi-asset products that invest in multiple cryptocurrencies saw inflows of $98 million, suggesting that some investors are viewing the recent weakness in altcoins as a buying opportunity.
Regionally, the United States led the way with $475 million in redemptions, followed by Canada, which also saw a large outflow of $109 million. Germany and Hong Kong saw relatively small outflows, while Switzerland and Brazil were the only bright spots with inflows of $39 million and $48.5 million, respectively.
The latest fund flow data comes amid a broader cooling in the crypto ETP industry, with global ETP volume hitting its lowest since the Bitcoin ETF launched in the U.S. in January, with just $6.9 billion traded last week.
Unstable fund flows and declining trading volumes suggest the crypto market is facing a crisis of confidence as investors reassess their expectations for monetary policy and global economic growth. The long-term bull run for Bitcoin and cryptocurrencies is alive and well, but the road ahead looks difficult.
Editor: Stacey Elliott.
